Thursday, 30 March 2017

In what is becoming a boringly repetitive story, yet another Crowdcube funded company, Easy Property, has crashed its projections. The results are quite spectacular.

Easy Property raised £1.36m in 2014, from 376 Crowdcube investors.

The company admits in its latest accounts that its progress has been a little slower than expected. They also say that they will have to raise even more money (they have already blown the 2014 forecasts) this year.

Here is a comparison between what they told people would happen (and what they both valued the company on and sold the shares using) and what has actually come about -

2015 - Revenues £ 144k ...................Projected £6.8m

P&L -£6.77m.................. -£4.99m

2016 Revenues £ 874k..................... £23.7m

P&L -£10.94m................ £2.67m profit

This creates a gap for the last 12 months, between what they told investors would happen and what they have actually delivered, of a world beating £13.5m in the P&L.

Since 2014 they have raised over £24m in equity finance, when they predicted only £12m in total. As we know, they are about to have another go. This new new round is not in the projections, mind you, nor was the last £12m.

Since 2014 they have delivered next to no revenues but the administration costs to achieve this have come in at over £18.6m, when the projected figure for healthy revenues was only £16m.

All of this according to Seedrs' Jeff Lynn is perfectly normal and to be expected. We beg to differ.

The company was valued at £68m in 2014 when it appeared on Crowdcube. What value now?

We wish all 376 investors (who are according to the Directors are going to finance the next round) the best of luck.

Ethos Global, who raised £709k on Crowdcube less than 12 months ago, are now 6 months overdue with their accounts and AR. Now the co founder, Ms Hersch, has resigned.

The company's 2016 Crowdcube pitch talked a great game about their existing and highly successful Cambridge studio and the plans to open many more. Shortly after raising the funding, the Cambridge studio closed with the property being put on the market by Bidwells. They then opened another first studio in their chain, in London. So far that's it.

When contacted, the company pretended to have a PR department, who unsurprisingly refused to answer any of our queries. Readers may remember that the Solar Cloth Company also came from Cambridge........perhaps something to do with the waters of the River Cam being a little murky?

As some one below has very kindly pointed out - this is not the full story. Hersch has just joined a company called Ethos London England, which was incorporated in February this year and is in turn wholly owned by Ethos Enterprise Holdings - also set this February and wholly owned by the other founder of Ethos Global, Dr Theo. Of course this all be for very good reasons but it seesm a little odd that shareholders in Ethos Global, who are waiting for accounts, have to watch as these two play pass the company. The music will surely stop soon? The reason we didnt see this connection before, is that these two both have names that lend themselves to multiple entries at Company House; a feature which you may remember was prominent in Solar Cloth Co fiasco.We wonder if this could have anything to do with the Cambridge lease? The property is still vacant and if their lease was a long term one with no break clause, ditching Ethos Global might be a solution in a pre pack deal. Wait and see.

Tuesday, 28 March 2017

I have to start by confessing a very considerable dislike for Julia Elliot Brown and all those like her. Her Upper Street company liquidation reveals a trail of debts of almost £500k after the collapse of her Seedrs ECF funded shambles. It's best summed up by the liquidator who stated that he couldnt give the remaining stock away, let alone sell it.

Now there is nothing wrong with a failure, or two even. In fact you can learn far more from them than success. But to fail with such large debts and then promote yourself, as she has, as a guru of small business and start ups, whilst the corpse is still wriggling towards its final resting place, is just a little too much. And yes, you guessed it, she is in our space, promoting herself as someone to make your equity crowdfunding campaign a success. Clearly not for the right reasons! Who needs Julia Elliot Brown when we have Seedrs and Crowdcube screwing up the sector already.

The art of alternative facts is alive and kicking. Wisealpha just filed accounts showing us how it's done.

Wisealpha raised over £570k on Crowdcube in April 2016. Their YE is June and the June 2016 accounts have just been filed.

These accounts show a considerable difference to the actuals/projections published by Crowdcube. This is even stranger when you consider the difference of over £90k in losses comes about with a projected turnover of just £11k.

It means that the projections for 2016, which were all but actuals by April 16, must have had costs that were almost half the real figures. Given that this increase has been achieved in 2 months that is some manipulation.

Although to be fair, it doesnt amount to a hill of beans when you consider what Crowdcube and Kelly Anne normally achieve.

Sugru are back - not once but twice. Having raised over £3m on Crowdcube in 2015, they then raised over £1m on Envestors in 2016 and are now looking for loads more on Crowdcube. They just love spending investors money.

The really good news for investors is that the valuation on the current pitch is around £34m, up from £27m back in 2015 and also up by £30m from last year. All of this on the back of vastly reduced revenues and vastly increased losses. But wait; growth is just around the corner to be sure. Is someone taking the Michael.

If you care how they are really doing or are wondering where they come on our scale of missed projections; they are winners. Projected revenues for 2016 were over £8m. The actual delivered revenue was just over £4m. Whats more worrying is that the overheads to deliver just £4m where the same as to deliver £8m and the inventory has actually increased on halved revenues. Long term debt has ballooned. Similarly, the crucial GPM was a sorry 48% against the projected figure of 60% and its progress rapidly north in 2017 to 64% is now projected to be a mere 55%. Of course given their record so far, it would be amazing if they get even close to these reduced figures.

In a helpful explanation of the current valuation, the management come up the usual. However if we sure to believe this valuation, then we have to believe the projections. History dictates that this is not sensible. Reasons given in the forum (there is no mention of this in the pitch) for the 2016 £4m revenue shortfall in no way cover this shortfall.....QED the £8m 2016 projection was nonsense and if you extrapolate this, the current projections are nonsense. So the valuation is nonsense.....so you are paying too much for your shares even if this company does make it.

The glue maybe good but by heck the management stinks.

In the in-between round on Envestors, in 2016 and not mentioned in the current pitch, they projected revenues for that year, that they now appear to have failed to meet. It is a constant story of making up some figures which they never get near to.

Sure they might get bought by other larger sniffers, but where is the upside on £34m when they always fail to deliver those crucial sales. With an advertised 2m plus users, it doesnt say much for repeat business when they are only buying less than one product each pa! The claim that it's used in over 170 countries is also an odd one - how could they know that?

The Crowdcube pitch says they are poised for growth - an awkward position they have been holding for 2 years. Profitability is due next year......of course it is. If you are into a little self flagellation, this one might be for you.

Sunday, 26 March 2017

Estates direct raised £500k on Crowdcube in 2014. Just in time for the SEIS allowances to be covered (3 years), the company has been sold to a newco backed by the Pels Family office.

B shareholders have been issued a final warning to accept this deal or be forced to by the Crowdcube drag along clause.

The newco have bought the equity in the company for £125k and taken on its debts. The company was valued by Crowdcube at £5m 3 years ago. You do the maths. Here's a clue - Crowdcube shareholders who invested £1000 will receive £7. So they will lose £993 if you ignore SEIS.

You have to ask the question. If Crowdcube are going to facilitate this kind of transaction, where the taxpayer is essentially helping investors make a return via this move (SEIS gives them a 50% rebate on their investment and no CGT on sale), how is this building sustainable SMEs for UK plc?

We were under the impression that the main reason for the Goverment's S/EIS scheme, was the creation of successful SME's. Apparently we were wrong.

This article came out recently on Altfi about the move by Revolut from Crowdcube to Seedrs for their next round of funding.

It's amusing for once to see Luke Lang caught with both feet firmly in his large mouth. But the journalist, who is either an idiot or just plain lazy, fails to notice the glaringly obvious 'fake fact' is Lukes comments below -

From the article -

''Crowdcube co-founder Luke Lang said that he was "very surprised and disappointed" at Revolut's decision, given Crowdcube's "proven track record of funding VC-backed businesses". He also noted that some firms have gone the other way, switching from Seedrs to Crowdcube. POD Point – which recently raised £1.5m as part of a larger £9m round, led by Draper Esprit – is one such example.''

Anyone who has any knowledge of ECF and its 6 year history, knows that Draper Esprit are now major backers of Crowdcube. Do you think this might explain this particular switch?

Wednesday, 22 March 2017

Master Investor Show: Setting the standard for investment events

This Saturday 25th March, the Business Design Centre in Islington, London, will welcome 4,000 visitors to the UK’s largest event aimed at informing, inspiring and educating private investors. The Master Investor Show brings together private investors of all portfolio sizes to hear keynote talks from celebrity investors and gain access to new investment opportunities.

Visitors can connect with the CEOs, founders and decision-makers of nearly 100 global companies in the event’s exhibition zones. Companies can tap into investors to increase liquidity in their shares, to raise new funding, or to place their financial products.

Master Investor CEO Swen Lorenz: “Modern investors look at a broad range of asset classes. Shares, bonds and funds remain a mainstay of every portfolio, but private investors increasingly also look at early-stage venture investing, peer-to-peer lending, crowdfunding, international stocks, and binary betting. They are also looking for alternative sources of information, and are keen to learn about online tools that can help them improve their investment performance. We offer all of this under one roof, in a single day, and combined with keynote presentations by some of the most highly regarded investment experts this country has to offer.”

Event organisers expect around 4,000 investors to attend. Now in its 15th year, the event initially began with a focus on AIM-listed companies and has since grown into a much broader affair. Ordinary investors will get the opportunity to speak to the CEOs and founders of 100 companies from multiple investment sectors, including equity funds and retirement saving, crowdfunding, life sciences and FinTech, and alternative finance such as film funding and peer-to-peer lending.

46 guest speakers will deliver talks across four stages. On the main-stage, five of the most prominent names in the British investment industry will give talks packed with investment tips, insights and the next market trends. This year’s main-stage celebrity line-up

The Master Investor Show has attracted major names as sponsors. Fidelity International, Seven Investment Management, Edison Research, SyndicateRoom, Deutsche Börse, Northland Capital Partners Limited, Selftrade, Huddle Capital, KPMG, and London South East are all sponsoring the event. Share Radio and TipTV are media partners.

Slippery little suckers - these success stories.

Ecco Recordings raised £134k (corrected from £234k as typo)on Crowdcube back in 2013. Their main pitch was a band called These Reigning Days - who were going to make it B.I.G.

Several years later and they may have - Reigning Days have just signed with Marshall Records.

The Ecco Recordings website, however, is down and they were last reported heading into dangerous waters with their balance sheet in tatters in the wind.

Looks like another empty stage for all those shareholders. One shareholder has complained that no communication from the company has been received since the Crowdcube round. It's a similar story with most Crowdcube funded companies.

MEEM raised over £700k on Crowdcube and then went into administration. One of the secured lenders to the company who has now been repayed, is one the directors. In a pre pack deal, most of the remainder of the outstanding debts has been passed onto the newco - a total of over £1m; £830k of which is from employer liabilities.

However the pre pack and administration has been stalled as two of the company's shareholders are considering or are taking, legal action against the company directors. No detail is given but one can assume it's not because they behaved normally.

We wrote about MEEM's collapse and pre pack deal here. Crowdcube's great facilitation just keeps on rolling. This year MEEM was due to be making over £25m in net profits according to the Crowdcube 2015 projections. Shame.

Monday, 20 March 2017

Red Squirrel Group raised £651k on Crowdcube at a valuation of £5m in 2015. Now they appear to be back as Mad Squirrel at a valuation of £9m on a shambolic platform called Right Crowd. How this platform is allowed to operate even within proximity to an FCA license is beyond us. The forum Q's suggest this will be a massive flop.

You can have a good laugh here - https://therightcrowd.com/.

This is exactly why equity crowdfuding will go down the tubes. Red Squirrel ran a very odd Crowdcube campaign, with the line between their two operating companies and the Holding Co almost impossible to understand. Recent accounts have the holding co making a £7k loss but the two subs have made a total of £160k loss for the year. On Crowdcube, they predicted a profit...of course.

Talk of dividends for 2017 look like the usual Crowdcube fantasy.

On Right Crowd, there is no business plan, no mention of types of shares and in fact nothing about what shares are on sale in what company as Mad Squirrel is just branding. To join RM all you have to do is give some vague(in our case spurious) details and you are in. This is wholly contrary to the FCA guidelines.

It is truly farcical. Asked on the forum why they have chosen this atrocious platform for their second raise, they say that Right Move is better for fast a growing business like theirs. Firstly there is little evidence they are growing at all and secondly Right Crowd looks to us more like a scam than a serious platform. These guys have under 500 Twitter followers and only 3 live pitches - all rubbish. We would agree with their strap line though - 'Crowdfunding with a twist'.

When asked on the RC forum about the dilution for existing CC shareholders, the reply is that by increasing the shares the value of the company has increased. We all know that is nonsense and even more so in this case.

Oh and if you are interested, the Mad (that's you if you are) Squirrel or whatever they are called, campaign on this platform has been a complete flop with only £80k of the desired £1m pledged. We'd imagine the £80k is from the company founders.

Yet another Crowdcube funded company comes off the rails within 24 months of funding. This Blog warned would be investors at the time that the claims made by the CEO were far from transparent.

To quote the email sent to shareholders - ' Unfortunately, due to the previous leadership the business has reached a precarious position.' IE it's insolvent.It had spent all of the £134k it raised on Crowdcube in 2015 and more by the end of 2015. In 2016 it was due to be turning over £1.23m with profits of £294k. In fact it only achieved just over £80k in revenues, with a small loss of £8k,; cut back from the £150k it lost in 2015 when it received its lovely lolly from 133 investors.The leadership that is roundly blamed for this shambles is one Mal McCallion, who is described in the Crowdcube pitch thus - Mal was involved in the launch of two very successful property technology start-ups, Zoopla & Primelocation. He has spent 15 years immersed in UK property tech.and

Mal has extraordinary experience in this marketplace, having been on the launch team of Primelocation in 2000 - taking that all the way to exit in 5 years for £48m - and driving the re-launch of Zoopla, when it pivoted from a private sales platform to an estate agent subscription site from 2008.

Having spent three years helping to build Zoopla from zero subscribing agent branches to a solid number two in the property portal market (behind Rightmove) by 2011, Mal was headhunted to join Brent Hoberman, co-Founder of lastminute.com, in an interactive floorplan business which let people build Computer Generated Images (CGI's) of their actual homes with up to 125,000 new furniture items in them.

Having sold that to Floorplanner in 2013, in 2014 Mal went to run Fine & Country / Guild of Professional Estate Agents' technology company, PropertyLogic. The concept of a new start-up in raterAgent became too tempting in December 2014, however and, within a month, the 'beta' site was launched in January 2015.

Until he began to use every waking hour creating and nurturing raterAgent, Mal loved running, cycling and spending time with his family. He is a downtrodden Ipswich Town fan and knows more than anyone reasonably should about Simple Minds' back catalogue and Blackadder.

That hardly sounds like someone who would place the company in such a precarious position by accident. Mal resigned a while back and we wrote about this here and here whilst the pitch was live and in fact told investors that the claims made on the Crowdcube pitch were dubious...at best. Crowdcube must be held accountable for this misinformation - it was after all a prime part of the pitch they vetted and published under their FCA license. But of course they wont be. And so it goes on and on and on ......................................................................

Friday, 17 March 2017

Pizza Rossa raised twice on Crowdcube in 2013 and 2015. An LBS award winning business plan and Crowdcube accolades to die for, the Pizza chain is a sad sight 4 years on, with just the one solitary unit.

We asked the London Business School how they allowed their hard won barnd image to be used on such an obviously flawed project but have yet to receive a reply. LBS have asked Pizza Rosa to repspond and below is the email from them 'explaining' how things have gone so very wrong. Apparently the LBS connection is not significant, which rather contradicts the statement made by the CEO of PR 'Our Success Will be London Business Schools Success' on the video! Anyway the CEO very kindly gave us these 'clarifications'.......:)

'A few clarifications follow below.

1- The London Business School did not back the pitch. We won business planning awards not only at LBS but also in international competitions, in front of entrepreneurs in private incubators, with top accounting firms and were finalists in a national competition organised by one of the leading British banks. We were a business incubated at LBS but LBS as a business education institution did not endorse the pitch. Nothing different was stated anywhere and your sentence "Your pitch was backed by LBS" is incorrect.

2- The projections in the initial pitch were based on market research and benchmarked against existing businesses. All projections in the business plans were made to the best of our knowledge at the moment of writing them. The first pitch was based on a business plan for a start up and this was clearly stated in the pitch.

Optimism is inherent to entrepreneurship otherwise none would leave a secure and comfortable life and get exposed to the risks of starting a business.

The projections in the business plan for the second pitch incorporated the initial results after opening the second outlet (which opened 5 months after the first). The third outlet opened 10 months after the first (in a progression aligned with the initial business plan). We started commercial agreements with third parties ahead of the initial projections. There were a number of contingent, cultural, commercial and market conditions that forced our decision to close down the second and third outlets. We were looking to raise more equity in the second round to target a different part of the market and rectify some of the initial assumptions that were proven wrong: we did not achieve that. Our bad, but the above delayed our plans.

3- An an LBS alumnus I found interesting your comment about having done a "real MBA at Cranfield".

4- Crowdcube clearly states that investments in start ups are at risk. It is up to investors to review the business plans to form their idea about investments. The Q&A section in each pitch is generally a very good platform for criticism and skepticism to be exercised on every projection/information included in the pitch.

We have highlighted the 'reasons' for the closure of units 2 and 3 almost as soon as they opened. We thought this was highly informative.

Pizza Rossa sums up much of what is wrong with Crowdcube's model of equity crowdfunding.

They came to Crowdcube in 2013 boasting the top award from the LBS enterprise competition. The CEO was typically arrogant - throwing back any advice and denying that there could anything wrong with the model. As it turned out it was fundamentally flawed for the most ludicrous reasons - which says volumes for the LBS enterprise programme.

Even when they returned at the start of 2015 for more cash, they refused to accept that things had not just gone badly wrong but had essentially not gone at all. Attempts to trade units in the City on Saturdays, a point made to them in the first round and flatly contradicted by the CEO, proved disastrous as did new unit openings. Promises in both rounds of a 'chain' have been shown to be total nonsense. There is still, after 4 years, just one unit costing an incredible £600k plus to open.

Losses have mounted and the latest accounts due out any day will show us more of the same. It has been a total shambles.

Why?

Put simply the CEO and his team didnt have a clue what they were doing. And the same could be said for Crowdcube; although they still picked two lots of lovely commission. LBS seem to have gone to sleep in handing him his ace card of the award - he was not shy in bringing it out to hit people with when they commented on the flawed plans. Crowdcube lavished him with further awards and allowed the company back for a second round at the usual ridiculously increased valuation - £1m to £1.5m.

Crowdcube vetted and allowed plans that were obviously flawed and projections that were Trumponian. Investors partly dazzled by the hype and in the second round, too afraid to cut their losses have kept this disaster afloat, burnt money and claimed back tax reliefs.

Wednesday, 15 March 2017

New Galexy have been consistent performers for Crowdcube - missing all of their 3 year projections handsomely. The pitch stated that the company aimed to be sold in 2018 for squillions.

Well the good news is the company has just posted its YE Oct 16 accounts and they show net profits of around £290k, up from £90k. The bad news for investors is that this figure was supposed to be over £2.6m. At this rate they may get sold by 2025.

Cash is looking tight, so we'd expect to see the company back for more from the trough soon. At a greatly increased valuation, of course.

Crowdmortage, no sorry Fruitful Finance Limited........oh what, oh no sorry Fruitful Market Place are now up and limping again.

Breaking - This company was promoting its new 'service' at the MI event we attended yesterday (25 March 2017). When a brand new co promotes itself by claiming returns of over 30% - implying that these have been achieved - it's worth being a little sceptical. Lot of sharks in the pond.

We were sent this email from Ex Fruitful CEO to ex Fruitful shareholders - today (22 March 2017) -

Fruitful Finance Ltd - Courtesy Email

Hello ,

This is a courtesy email from myself, Luke Barnes, following questions and comments some investors in the now dissolved Fruitful Finance Ltd have recently made.

You may be aware that I have started a new business, to which I would like to clarify some points for everyone so there is no confusion.

The business you invested in, Fruitful Finance Ltd, operated the peer-to-peer mortgage platform lovefruitful.com, which was dissolved last year. This business was a platform that enabled individuals to lend money directly to mortgage borrowers in return for a set interest rate on their investment. Subsequently, it enabled businesses to obtain a competitively priced mortgage to purchase property for their business.

Unfortunately, after more than 3 years of hard work, we were unable to make the business model work for the following reasons:

1.Due to the cost of acquiring a large enough group of investors to reach the scale required for a low margin mortgage business.

2.Not able to raise sufficient capital in order to scale the business.

3.In a planned transition to institutional capital, the credit-line agreed from a major lender was withdrawn due to changes in their lending criteria following the EU referendum.

The company ran out of money 6 months prior to it closing, with the team working without a salary and covering overheads personally during this period. Since the company had ran out of capital and had no foreseeable route to save the business, after a thorough debate, we took the hard decision that it was time to close Fruitful Finance Ltd.

Since closing the lovefruitful platform and business, I have personally started a new venture within the property development sector.

This is a completely different business to Fruitful Finance Ltd.

This includes:

1.A completely new business model within property developments opposed to finance.

2.New team

3.New set of Regulation

4.New Investors / Share holders

5.New Website domain

6.New Website

7.New Software

8.New trading name

I have made sure that nothing from the lovefruitful business has been used in my new venture. The only exception being the company fruit logo, which I personally designed and own the copyright to.

Although it was unfortunate that we were unable to make the lovefruitful business work, this hasn’t deterred me from my goal of growing a successful business.

It’s very disappointing but some investors from Fruitful Finance Ltd seem to be attempting to sabotage my new venture through negative comments on certain public channels. So I would like to make it clear that it was disheartening that the old business wasn’t a success, but it was our only option after many months of trying to save it. I would also like to point out that I also made a loss on this business as I put in a significant amount of capital alongside Crowdcube investors.

Starting a new business in a completely new sector is well within my rights and morally sound since investors back a specific business, not a person or any business concept they come up with in the future.

I thought this email would help clarify some questions you may have and to assure you that lovefruitful is not continuing under a new name, I have simply started a new venture in a new sector.

I hope this helps.

Best Regards,

Luke Barnes

How this is supposed to help investors who lost their cash is not made plain. Fruitful in its various guises raised 3 times on Crowdcube and never delivered anything. The company has various off shoots at CH and its final accounts filed at CH state that all lines are zero. Were shareholders notified? Where has the money gone - all £183k of it. We find it hard to be sympathetic except to his ex shareholders. Claims like this made on the Crowdcube pitch dont help - 'In discussions with 2 major TV channels and production companies in relation to making a documentary on our revolutionary business and how were changing the UK financial market to help rebuild the UK economy.'. Not one but two major TV channels - -hahahahahaa. Rollocks. And just for the record Mr Barnes is either a liar or ignorant, as the IP for Fruitful was owned by the company (not him as he claims here) and was transferred to the newco Fruitful Market place Ltd in Sept 2016 - according to the Gov IP Office records. More rollocks.

This takes some balls - taking investors cash and then delivering nothing and then just to add a twist to reinvent yourself three times. And this has all been achieved by one man, Luke Barnes. Luke originally funded via Crowdcube - congratulations to the platform for helping UK plc create yet another fantastic success. They appear to have kept (is that the right word?) the original trademark logo for the newco. Did investors in the closed co get a say in this?

The latest vision seems to entail building sustainable homes - with their FCA sanctioned website promoting annual returns of 33%. They even have a quote from Kevin of Grand Designs fame - although we should point that as far as we know Kevin is not endorsing this company. The team have credentials so who knows.

Thanks go to the ex shareholders who have expressed their amazement and irritation in equal measure. As they rightly point out, nothing illegal here. But a word of advice for would be 'investors' on this Crowdcube platform. Once these so called entrepreneurs have your details, expect frequent requests for cash for whatever venture they create once the initial one has gone tits up. Crowdcube wont tell you that.

We suppose you can expect to see these guys on an equity crowdfunding platform near you anytime soon.

The Solar Cloth Company raised around £1m on Crowdcube and within 18 months it had collapsed, taking all this and other money with it.

It is one of the scandals that Crowdcube try very hard to ignore. Recent revelations by the liquidator will make this much harder. It really is one massive bloody mess entirely facilitated by the Crowdcube platform. It looks likely that the final outstanding loss will be north of £3m. Crowdcube will of course have kept their revenue from the 'deal'.

We have written about the lack of due diligence carried out by Crowdcube on the CEO - Perry Carroll, or Peregrine Carroll, or Perry Sakarta Carrol or any other aliases he used at Companies House to hide his bankruptcies and failed enterprises. According to the Crowdcube pitch he was a leader in his field and a successful businessman. They simply never bothered to check.

This is what the Crowdcube pitch stated in 2014 -

Key drivers: Sales will benefit from a combination of a higher company profile, increased install base, and intense lead generation activity from an enlarged sales team.

Sales estimates: Sales forecasts of £7.5m, £40m and £48m over the next three years are in line with other new entrants to the photovoltaic industry. A B2C installer of solar panels demonstrated a similar rapid growth over three years of £0.2m, £7.5m and £26m.

Basis of modelling: The company sales forecast has been modelled on industry averages. Sales projections are conservative and within reach of the company structure. A current pipeline of over £4.5m has been achieved with only one full-time sales professional.

The evidence very clearly shows that all this was rubbish. Instead of £7.5m, the company's revenue was £180k and instead of £40m the company was closed. The obviously outrageous claim to a current pipeline of £4.5m is simply a lie. All of this was checked and rechecked by the Crowdcube DD department before they published it on their FCA regulated platform. It is clear the platform is not fit to hold a FCA licence of any description.

Now the interim report shows just how poorly run this company was. The debt declared by the directors on collapse, that was due to their landlords, was put at £600. The claim that has come in from the landlords agents is for £185,000. This is sounding a bit like the reverse of the Crowdcube projections.

Meanwhile nothing has been done to sanction Crowdcube, who despite claims to the contrary, are still pumping out fantasy numbers for companies that will never get close to them. They have friends in high places. The FCA are still sleeping on it - literally.

The final report will reveal just how far off the mark Crowdcube were. A recent article here is worth a read.

Tuesday, 14 March 2017

Chilango, the Mexican fast food mini chain, opens two, closes one and has one reported missing, in a race to achieve growth after raising £5.4m on Crowdcube.

Chilango has raised equity and bond capital on Crowdcube. Accounts filed two months late, show losses for the year of £1.97m against projected losses of £900k. £800k of this is explained by the loss of their 2015/16 vat reclaim.

The £2m 4 year Burrito Bond is due for repayment next year.

The chain, which had 10 units in 2015 today has seen revenues rise by only 7% for the year in question. Revenues for the year were 6.97m when they were £6.5m for YE March 2014. They fell way short of their expected revenues of £9.7m. A failure in their brand new Camden outlet, which is now closed after a year of operation, can explain some of this. The company states it has 12 open units currently operating in its accounts but their website states they have only 11. Its seems a little careless of the management to actually lose an outlet?

The company's GPM has fallen by over 4% in the year.

With advisers like Kevin Bacon (no not that one) and clients like Boris Johnson, this company may yet go far but its has certainly slipped off the starting blocks. Vamos Muchachos!

Monday, 13 March 2017

They claim this will help UK equity crowdfunding. Evidence is a little sparse.

Crowdrating is run by ex City investment folk who have no real direct hands on experience of business start ups - except for Crowdrating and a few flops. It has been accused of pressing companies, already launched on their equity crowdfunding campaigns, for money to produce a good rating. A claim the company strongly denies. The CEO, Alex Heath, has no record of success in start ups and one quite large failure. His Linkedin page would appear to be ok.

Businessagent is run by Sacha John Bright, whose experience is interesting but certainly doesnt inspire any confidence he has a clue about creating a successful business. Companies House records 8 businesses that show a very different story to the one he has created on his Linkedin page. For us this is a sure sign of things not being as they seem. A variety of very small or non trading companies, 3 of which have gone bust with zero value and sizeable debts - Mr Bright has resigned from all three just before the collapse. On one occasion his Linkedin page claims he sold out to fellow founders which seems odd as the company had achieved nothing and went bust shortly afterwards.

It is exactly the sort of misinformation that we have been highlighting as harmful for the already tainted image that UK equity crowdfunding has. And unfortunately it is exactly the sort of issue the internet allows to flourish.

The 'article' highlighting this news was in the equity crowdfunding PR rag Crowdfund Insider which really should come with a Government health warning for constantly spreading alternative facts.

One good point about this merger is that this new team will certainly be able to advise on liquidations when the final whistle blows.

BREAKING NEWS

Purple Harry have eventually called it a day - having never come close to their modest, by Crowdcube standards, projections. They were backed by Britain's Olympic stars the Brownlees Brothers

We dont yet have the figures but for 2016, the company was supposed to be making a profit of over £200k. Needless to say it didnt. When Crowdcube repeat their denial that this all going tits up and explain that very few companies have closed, they ignore the likes of Purple Harry who have struggled on for over 4 years since funding and achieved not going bust - until now. There are many many more out there in a similar situation; as yet under the radar.

Despite the views of the CEO of Seedrs, we do not believe it should be fine to project unattainable goals in order to encourage investors to part with their cash. These projections go into making up the valuations against which the shares are sold. The fact that your platform states it doesnt endorse them but makes them available only through the platform, is like Del Boy selling a car based on its top speed, even though to drive at that speed is against the law. It doesnt help investors, it certainly doesnt help the businesses and it doesnt help UK plc; who have now part funded (S/EIS) all these failures.

The only people this stupidity helps are the Insolvency Practitioners.

When will the Government wake up?

Some platforms are far too arrogant given their total lack of success to date. Projections should not be Del Boy (no offence Del) style persuaders - this is simply too important for the platforms to be able to dictate their own terms.

Friday, 10 March 2017

Cell therapy raised over £600k in December 2014. Now new investment from Japan has enabled a company restructuring and an offer to shareholders to either take a share swop or cash - representing an almost 2X gain.

This is Crowdcube's best result to date. Shareholders paid £37 in 2014 and 24 moths later they are being offered £101.

Although it is not all good news.

EIS reliefs which would have been taken by all B shareholders for tax year 2103/14, will have to be recharged if they opt to sell - with interest. They will also be liable to the full extent of any CGT for this tax year, giving them very limited time to adjust if their allowance is already used up.

I suppose you could argue you could get these odds at the bookies. Still it's better than poke in the eye with a blunt stick

Enclothed is an on line men's clothes retailer. It raised funding on Crowdcube in 2015, has missed those projections by miles and has sent existing shareholders an update that gave out some very alternative facts. None of this mentioned in the current Seedrs pitch which has doubled the value of the company since 2015.

Why?

Just In 14 March - Seedrs have confirmed that they do not feel the differences on their site and the report sent to shareholders is anything worth mentioning. Much like the difference between the Crowdcube projcetions and the real revenues/losses.

On 2nd December 2016 Enclothed sent an update to shareholders stating -

Dear investors, As we approach Christmas, there are a number of exciting milestones and news to share. End of ﬁnancial year 3This year we have focused on becoming a scalable and consistent business. After the sheer chaos of ‘Dragons Den’ we have worked tirelessly to build our technology, team, and operations. So we are happy to announce that we hit our predicted year-end gross revenue target of £1.2m. This shows the huge potential of our model and the overall growth of the company. This sets us up for a successful 2017 where our target will be to hit the £2.5m mark. 2014 - £200,000 2015 - £800,000 2016 - £1,200,00

The YE is October. The email went on to say that they were working on the new Crowdcube pitch for 2017. You should note the comment 'we hit our predcited year end gross revenue target of £1.2m' when you read the Crowdcube target.

In the current pitch on Seedrs, the financials show the following figures for revenues for these years(these are also financial years Nov-Oct) -

2014 - £91,0002015 - £611,0002016 - £978,000

Ignoring the massive gap between the first set and the 2015 Crowdcube projections for now, why would a company send out this information to its shareholders? Are the figures given by Seedrs' pitch wrong?

We asked Enclothed to explain the differences. Dana, one of the founders, replied -

Hi Rob

Would you be able to clarify where these discrepancies are for me so that I can investigate/clarify as I am unsure of what figures you are referring to.

In terms of SH update on 2nd December please be mindful that the figures state calendar year, rather than financial YE which Seedrs documents state, and state gross figures rather than net.

Many thanks

Dana

What could she mean by gross - surely not inc of vat, as that would be kindergarten error and the sums still dont add up. Also you will have spotted the obvious problem with this explanation - the SH email states in its heading very clearly - End of FINANCIAL Year 3 and then gives the figures. Seems pretty clear to us. We asked for further explanations but nothing so far. Maybe they are not too good with figures. Jeff Lynn says that this doesnt matter for entrepreneurs.

The projceted revenues from the CC pitch are listed here for those who think these things do matter - 2014 - £95k2015 - £1.3m2016 - £3.35mJust how far out do these figure have to be before we can consider them as misdirection or even misselling, is a point neither Seedrs nor the FCA have answered.

The CPA given to the SHs is also completely different to the one on Seedrs. For obvious reasons we are not going into the actual numbers. Suffice to say the difference is very substantial in the wrong way.

Enclothed isnt a bad business. It has some good backers and has made progress in 2016. So why do we have to see this nonsense touted about? Well if you believe Jeff Lynn, CEO of Seedrs, then its because all early stage businesses have to be very over optimistic with their projections - all experts says so. He also states below in a response to our query about this, that Seedrs did not carry the Crowdcube projections and the very substantial shortfall from the actual figures, because it's not meaningful information for potential investors.......really? -

I therefore feel, and have always felt, that the premise of your attacks on most Crowdcube-funded companies is very unfair to those entrepreneurs, as it expects something of them that is directly contradictory to the expectation set for them by everyone else you are working with. I don't think you care about that (and I am sure you will post some sort of snarky reply to this on your blog), but for purposes of your specific question, this is why we do not believe that the fact that a business has not hit a previous set of projections represents meaningful or useful information.

As you can imagine, we do not agree with this - it is certainly information I would want to know about. Granted it's not convenient for a doubled valuation. We'd love to hear from shareholders who do agree.

In our opinion a company using any ECF platform to raise funding, should have to follow these simple rules -

1. Accounts for the last 2 years in full filed at CH. Plus accounts for the next 3 years in full filed at CH.

2. Declaration of any other ECF funding round, with full financials and explanations as to why projections have been missed.

This might create a more open and lets face it, successful fleet of ECF funded business, for UK PLC going forward. It's not like we have been run over by the exits and the ROI so far. The platforms will say no way, more work for them and potentially less investment (their revenue source) and the FCA will say 'what's that' and nothing will be done.We had this further response today from Jeff Lynn, CEO of Seedrs, who had asked us to provide the SH information mentioned above. We refused stating that firstly it was not our job to provide Seedrs with information about their vetted clients and secondly he should be finding this sort thing out first hand and not from us -"The evidence we have received at this stage does not support the truth of this allegation. If we receive evidence to the contrary at any stage, we will of course review it and take appropriate action then."We thought that it was Seedrs job to check out their pitches' claims and properly assess their suitability for investment. We'd be happy to help if they cant manage this by themselves.

So now we have what has to be a first - an explanation from one of the UK's leading equity crowdfunding platforms, as to why so many companies miss their financial projections by so far.

And we have this from the horse's mouth.

We were asking about another issue about a specific pitch and its projections, which will become a post later, when Jeff Lynn, the much heralded founder and CEO of Seedrs, explained why projections in this sector had to be so far removed from reality.

Here is what he said -

....financial projections for early-stage businesses are intended to be best-case portrayals of what success could look like, not a conservative view of the most likely outcome. That is how every institutional and professional investor in this space looks at them, and that is how every entrepreneur is taught to build them. I therefore feel, and have always felt, that the premise of your attacks on most Crowdcube-funded companies is very unfair to those entrepreneurs, as it expects something of them that is directly contradictory to the expectation set for them by everyone else you are working with. I don't think you care about that (and I am sure you will post some sort of snarky reply to this on your blog),......

So there we have it. In B&W. Its the norm and we are the only people who dont know this.

We dont agree and we have been involved with company start ups for over 30 years. Our evidence is irrefutable, as the report on Crowdcube will show. Entrepreneurs are not entrepreneurs because they have some idea and put together fantasy numbers to sell equity to 'investors' on Seedrs or Crowdcube.

We'd like to hear from anyone who agrees or disagrees that projections used to sell equity to the public - as in the case of ECF - should be the fantasy figures that the company CEOs dream about, or if they should be at the very least middle of the road sensible, attainable figures. Of course CEOs can always state in the PD, that the figures are conservative and they expect to exceed them. Oh....actually that is what they often do. Which in turn begs the Q; what is that the CEOs know that Jeff Lynn doesnt?

Tuesday, 7 March 2017

So Trillion Fund has called it a day. The £600,000 Seedrs funded, Julia Groves backed, Efund never took off - it never even made it to the runway.

The fund started life as a P2P lender for the environmental sector. It switched to be a SAAS operator; which also proved a flop.

The claim is that the business is being sold. As there is little or nothing to sell, what this means is the business has folded; taking all of the Seedrs investors' cash with it. Vivienne Westwood owned 40% but then she can afford to throw it away.

One of their assets on sale is apparently the FCA license they have. Really?!! Can you really sell on FCA licenses?

Seedrs new metric gambit and a pitch currently half way to raising over £1m are both sure signs that market pressures have forced the platform to stoop to Crowdcube levels of openness.

We used to think Seedrs were amongst the good guys - the platforms who told it as it was and didnt play the PRing card. Those days are gone.

If their much heralded new metric, where they take imaginary share values to show investors how well they are doing, was not enough, we now have a pitch on the platform that has history when it comes to hoodwinking investors with its projections. It raised money in 2015 on another platform.

There is scant if any mention on Seedrs that this company has already used equity crowdfunding. There is absolutely no mention of the 2015 projections which the company has missed by several galaxies. The pitch and especially the video claim that the company is motoring. But just as an example the 2016 figures that have been created for this pitch show revenues of under £1m, when the 2015 projection was almost £3.5m. Even the year they pitched in was hammed up so they missed the projected revenues by over 100%. Add to this the crazy bungee jumping GPM, which always comes in well under projection, and you might wonder why Seedrs agreed to take these guys on. Perhaps they didnt know about the previous round or its fantasy figures?

All we are asking for is a basic standard of declaration - some might call it honesty. If this company is going to invent projections that it must have known it couldnt meet, to raise money, them surely it must be sensible for this fact to be known on its next attempt. If it had used the original platform again - it would have had to explain this gap in revenues and GPM. Instead it glosses over these unimportant things and talks about more important metrics like the numbers of Twitter and FB followers it has.

Seedrs now seem to be driven by the need to grab market share as Crowdcube tunnel their way ever faster into oblivion. They really dont need to use these tactics - Crowdcube will self implode and the market share will be theirs to share with the other sensible platforms. Credibility cant be repaired and they are in danger of losing theirs right now.

Lick and GF Foods both collapse to mark a sad February 2017 for the UK's leading Equity Crowdfunding Site

As usual Crowdcube have trotted out their 440 funded businesses and 93% of them still ok rollocks. What they dont mention in this distortion, is that of the 440, around 75% were funded in the last 24 months. Despite Crowdcube's ability to promote duds, it would take something special to get these to collapse in this time frame. Whats a far more significant real fact that our research (due out this month) will reveal, is that over 98% of the companies that have filed accounts since using Crowdcube, have missed their projections by miles. Crowdcube dont mention this, of course.

GF Foods had already gone bust in its original form - owing £400k. Why people chose to trust them to get it right this time is anyone's guess. They promised the world in their projections. They even showed profits in their historic accounts when the real accounts showed a loss. When GF were pitching for the second time, a forum Q dated October 2015, asked them if they were on target for the year, as they were already over half way through it. This was their response -

''At present we are matching sales to forecast - we have higher rates of sales from Sept - Dec in forecast due to seasonal listings and at present current orders for these products are matching the forecasts by customers.

We have new product listings with two major retails scheduled for February, so unless these range reviews are postponed by the retailers, which is highly unlikely we believe we will be on target to meet the forecast .''

They only achieved a t/o for the year of £600k according to The Grocer, against a projected £1.4m. When they made this comment they must have known that the £14.m target was pure fantasy. Oh well the CC DD dept must have been off skiing. How is it that the FCA just turn a blind eye to such obvious abuse?

Lick was just a non event. They had blocked us from their twitter feed because we asked them why their listings didnt match the real stockists. Now we know. Just young guys who decided to use other people's money to experiment with a fun idea. Crowdcube do lots of this type of facilitation. It's great for UK PLC - makes us look very professional.

Surely the time has come for something sensible to be done? People will, given the freedom of choice, continue to be conned by Crowdcube's dizzying promotions. But the facts all point to the failure of the platform to scrutinise what they publish, the failure of all but 2 of their pitches to produce any return - and even these two were very small. Its a total sham. Equity Crowdfunding can work but not when its being run by a couple of Ford dealers using a model where the crucial driver is is the top speed. It is the equivalent of buying a second hand car, where the seller tells you it has a new engine. 50 miles later the engine blows up. Well, says the vendor, that engine was new - it was new to this car!